Module 19 - Business activity, unemployment and inflation

Question 1

Full-employment level of GDP

Answer 1

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Question 2

Recessionary or deflationary gap

Answer 2

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Question 3

Inflationary gap

Answer 3

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Question 4

Continuous market clearing

Answer 4

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Question 5

Rational expectations

Answer 5

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Question 6

Explain the SRAS curve suggested by basic Keynesian analysis

Answer 6

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Question 7

Explain the moderate version on the SRAS curve

Answer 7

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Question 8

Explain the new classical version of the SRAS curve

Answer 8

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Question 9

Explain the upward slopping LRAS curve

Answer 9

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Question 10

Explain the vertical LRAS curve

Answer 10

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Question 11

Describe the characteristics of the long-run equilibrium position according to Keynesian economists

Answer 11

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Question 12

Describe the characteristics of the long-run equilibrium position according to new classical economists

Answer 12

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Question 13

Describe the Phillips curve

Answer 13

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Question 14

List the three main explanations for the disappearance of the Phillips curve

Answer 14

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Question 15

Distinguish between movement along and shifts in the Phillips curve

Answer 15

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Question 16

Give the formula for the expectations-augmented Phillips curve

Answer 16

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Question 17

Explain the accelerationist theory of inflation

Answer 17

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Question 18

Explain the rational expectations theory of inflation

Answer 18

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Question 19

Distinguish between the accelarationist theory of inflation and the rational expectations theory of inflation in terms of the implications for the Phillips curve

Answer 19

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Question 20

Accelarationist theory

Answer 20

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Question 21

Natural rate of unemployment or the NAIRU

Answer 21

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Question 22

Policy ineffectiveness proposition

Answer 22

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Question 23

Hysteresis

Answer 23

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Question 24

Underemployment

Answer 24

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Question 25

Discuss the effect on the Phillips curve of non-demand factors

Answer 25

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Question 26

Discuss the effect on the Phillips curve of inflation targeting

Answer 26

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Question 27

Disposable income

Answer 27

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Question 28

Marginal propensity to consume from disposable income

Answer 28

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Question 29

Consumption smoothing

Answer 29

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Question 30

Financial accelerator

Answer 30

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Question 31

Balance sheet recession

Answer 31

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Question 32

Accelerator theory

Answer 32

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Question 33

Real business cycle theory

Answer 33

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Question 34

Explain how consumption smoothing occurs

Answer 34

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Question 35

Describe six factors that affect consumption cycles

Answer 35

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Question 36

Explain how a balance sheet recession is caused

Answer 36

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Question 37

Explain the accelerator theory of investment

Answer 37

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Question 38

Describe changes in consumption, investment and stocks over the course of the business cycle

Answer 38

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Question 39

Give three “demand-side” reasons for the persistence of booms and slumps

Answer 39

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Question 40

Give six “demand-side” reasons for turning points in the business cycle

Answer 40

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Question 41

Explain the real business cycle theory

Answer 41

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Question 42

Give “supply-side” reasons for the persistence of booms and slumps and turning points in the business cycle

Answer 42

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